VAT'S IMPORTANT - NEWSLETTER 2024 - 06
NEWSLETTER 2024 - 06
WHERE IS THE PLACE OF SUPPLY OF SERVICES?
CONCRETE CLARIFICATION IS ALWAYS RECOMMENDED AS A MATTER OF PRIORITY
An interesting ruling by the Swiss Federal Administrative Court (SFAC) is that of September 6, 2024 (A-3375/2023). The taxpayer invoiced various services to a foreign company. The location of these services was disputed and had to be examined. In its ruling, the SFAC supported the Federal Tax Authority’s (FTA) view that the taxable person bore the burden of proof that it provided services within the meaning of art. 8 para. 1 of the Swiss VAT Act (= place of supply is where the recipient is established). In the opinion of the SFAC, the taxable person did not succeed in providing this proof. The appeal was rejected.
SUMMARY
In the course of a VAT inspection, the FTA found that services provided in Switzerland by the taxable person had not been declared as such. The FTA essentially took the view that the services provided by the appellant did not constitute services pursuant to art. 8 para. 1 of the VAT Act (following the principle that the place of supply is where the recipient is established). The taxable person was not willing to provide the FTA with more detailed information on the type of services invoiced or to make the corresponding information and documents available. It remains completely unclear what type of services were provided. The appellant, on the other hand, argues that the services provided are actually management services, which were provided to a recipient abroad and are therefore not subject to Swiss VAT
The SFAC states that management services are generally subject to the principle of the place of receipt. However, the place-of-recipient principle is subject to the provision that there is no case of Art. 8 para. 2 Swiss VAT act. In this case, the burden of proof is on the appellant to prove that the disputed services provided by it are services within the meaning of art. 8 para. 1 of the Swiss VAT Act and that the place of performance of these possible services is abroad. The SFAC however is of the opinion that it cannot be concluded that a total supply of services was made unless the individual supplies were specified in more detail. According to the Swiss VAT law, each individual supply is in principle an independent taxable item, i.e. independent supplies are treated independently. A total supply only exists if several supplies are economically so closely related and interdependent that they form an indivisible whole. The appellant was unable to prove that it had provided services within the meaning of art. 8 para. 1 of the Swiss VAT Act and that the place of these services was abroad. The court therefore came to the conclusion that the lower court had rightly demanded additional VAT and dismissed the appeal for this reason.
Summarizing, the court puts the definition of “management services” in writing and points out that it is the supplier’s obligation to bear the burden of proof that the services provided actually fall within the scope of art. 8 para. 1 of the Swiss VAT Act resulting that the place of supply is where the recipient is established. In the case at hand, the supplier had to remit the output VAT to the FTA. This is a huge financial burden followed by discussions with the customer.
This can be avoided by approaching the FTA upfront proactively. Your terraVAT team is happy to assist.
With best regards
Your terraVAT Team
Sabrina Frey Dr. Florian Hanslik
Senior Consultant Founding Partner
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